SGOCO Group, Ltd. Announces 2014 Annual Financial Results and Unaudited Second Half Financial Results

May 15, 2015, 17:00 ET from SGOCO Group, Ltd.

HONG KONG, May 15, 2015 /PRNewswire/ -- SGOCO Group, Ltd. (Nasdaq: SGOC) ("SGOCO" or the "Company"), a company focused on product design, distribution and brand development in display products, today announced its audited financial results for the year ended December 31, 2014 and the unaudited second half financial results of 2014.

2014 Annual Results Overview

The annual results of SGOCO were adversely impacted by the weak industrial growth and increase in competition and in the traditional display industry in China.

  • Annual revenues decreased 78.5% to $43.2 million in the year ended December 31, 2014, as compared to $201.0 million year-over-year.
  • Gross profit dropped 87.3% year-on-year drop to $2.0 million in the year ended December 31, 2014, from $15.9 million in the same period of 2013.
  • Net loss became $2.3 million in the year ended December 31, 2014 as compared to $8.4 million of net income year-over-year.
  • Basic and diluted loss per share was $0.13 in the year ended December 31, 2014, as compared to basic and diluted earnings per share of $0.49 in the same period of 2013.

Mr. Shi-bin Xie, President and Chief Executive Officer of SGOCO, commented on the results. "SGOCO has faced a challenged market condition throughout 2014 resulting from the drop of the traditional flat panel display market."

"As a result, the Company decided to further restructure its business by disposing SGOCO (Fujian) Electronic Co., Ltd., a subsidiary engaged in sales and distribution of LED and LCD products in Southern China ("SGOCO (Fujian) "), in December 2014. After that, the Company will decrease the sales of traditional flat panel LCD and LED monitors, but increase the sales of All-In-One ("AIO") and Parts-In-One ("PIO") computers."

Mr. Xie concluded, "In 2015, SGOCO will focus on new investments and exploring new products, including but not limited to acquiring equities of potential target companies related to electronic and internet-related businesses and enriching the our product range."

FULL FISCAL 2014 AND SECOND HALF OF 2014 FINANCIAL RESULTS

Revenue

Due to the increasing popularity of mobile devices, the contraction of personal computer market demand continued and it adversely impacted the market demand of our major product, flat panel LCD and LED monitors. The drop in market demand also led to intense competition with our peers which has further affected our revenue and gross margins. SGOCO's revenue decreased by 78.5% to $43.2 million in the year ended December 31, 2014 compared with $201.0 million in the year ended December 31, 2013.

Total revenue for the second half of 2014 decreased 89.6% to $9.1 million from $87.2 million in the second half of 2013. The year-over-year revenue decrease was mainly due to the significant contraction of market demand in the second half of 2014 when comparing with the same period in 2013.

Gross Profit and Gross Margin

In the year ended December 31, 2014, the gross profit of the Company decreased 87.3% to $2.0 million from $15.9 million year-over-year. The overall gross margin for the year ended December 31, 2014 was 4.7%, as compared with 7.9% during the fiscal 2013.

Gross profit for the second half of 2014 decreased 96.1% year-over-year to $0.3 million from $7.0 million in 2013. The gross margin for the second half of 2014 was 3.0%, as compared with 8.0% for the second half of 2013.

Operating Expenses

Selling, General and Administrative expenses for the fiscal year of 2014 decreased 31.0% year-over-year to $3.4 million from $4.9 million. Selling expenses decreased 72.3% year-over-year to $0.3 million as compared to $1.1 million in the 2013. The decrease in selling expenses was primarily due to the decrease in sales volume and reduction of sales personnel during the year. General and Administrative expenses for the fiscal year of 2014 decreased 19.3% year-over-year to $3.1 million from $3.8 million. The decrease in General and Administrative expenses was mainly due to tightened expenses control.

Selling, General and Administrative expenses for the second half of 2014 decreased 61.3% to 1.0 million from $2.6 million for the second half of 2013, after the consideration of $1.3 million of recovery of bad debt expenses recorded in the first half of 2014. Selling expenses for the second half of 2014 decreased 89.0% year-over-year to $0.1 million, representing 0.6% of total revenues, compared with $0.5 million or 0.6% of total revenues in the second half of 2013. General and Administrative expenses decreased 54.6% year-over-year to $0.9 million from $2.1 million for the second half of 2013.

Operating loss 

The Company recorded $1.3 million operating loss in the year ended December 31, 2014, as compared to $11.1 million operating income during the same period of 2013. Operating expenses in the year ended December 31, 2014 decreased 31.0% to $3.4 million, which recorded for $4.9 million in the same period of 2013.

Operating income for the second half of 2014 was $0.6 million, decreased from $4.3 million in the second half of 2013.

Net loss and loss per share

The Company's net loss for the year ended December 31, 2014 was $2.3 million, which changed from the net income position of $8.4 million year-over-year. The net margin experienced a loss of 5.3% in the year ended December 31, 2014, as compared to 4.2% net profit margin during the same period of 2013. Basic and diluted loss per share was $0.13 in the year ended December 31, 2014 based on 17,406,069 weighted average number of common shares, as compared to basic and diluted earnings per share of $0.49 based on 17,193,189 weighted average number of common shares for the same period of 2013.

Cash and working capital

SGOCO held $0.1 million cash and cash equivalents as of December 31, 2014, compared to $13.5 million as of December 31, 2013. Working capital decreased to $85.2 million from $87.8 million at the end of December 31, 2013. Increasing cost in the products and suffering of operating loss are the major causes for the drop of cash flow.

Sale of SGOCO (Fujian)

On December 31, 2014, the Company announced the entering of a Sale and Purchase Agreement ("SPA") to sell its 100% equity ownership interest in SGOCO (Fujian) to Apex Flourish Group Limited ("Apex"), which is an independent third party with interests in real estate and forestry products.

The sales price for all the equity of SGOCO (Fujian) is equivalent to the net asset value of SGOCO (Fujian) on December 31, 2014 calculated on the basis of Chinese Accounting Standards. The final amount is $11.0 million (the "Sale Price"). Apex also agreed to assume responsibility to settle the entire balance of accounts payable and other payables (the "Payables") due by SGOCO (Fujian) to SGOCO and its affiliates, which amounts to $80.4 million, by installments prior to June 30, 2015. The transfer of the Sale Equity was effective on December 31, 2014.  As of April 30, 2015, Apex has paid the aggregated amount of $75.9 million to the Company as installment payments of the Sale Price and settlement of the Payables.

About SGOCO Group, Ltd.

SGOCO Group, Ltd. is focused on product design, brand development and distribution in the Chinese display market, including computer monitors, AIO and PIO computers and application specific products. SGOCO sells its products and services in the China market and abroad. For more information about SGOCO, please visit our investor relations website http://www.sgocogroup.com.

Safe Harbor and Informational Statement

This announcement contains "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact, including, without limitation, those with respect to the objectives, plans and strategies of the Company set forth herein and those preceded by or that include the words "believe," "expect," "anticipate," "future," "will," "intend," "plan," "estimate" or similar expressions, are "forward-looking statements". Forward-looking statements in this release include, without limitation, the effectiveness of the Company's multiple-brand, multiple channel strategy and the transitioning of its product development and sales focus and to a "light-asset" model, Although the Company's management believes that such forward-looking statements are reasonable, it cannot guarantee that such expectations are, or will be, correct. These forward-looking statements involve a number of risks and uncertainties, which could cause the Company's future results to differ materially from those anticipated. These forward-looking statements can change as a result of many possible events or factors not all of which are known to the Company, which may include, without limitation, requirements or changes adversely affecting the LCD and LED market in China; fluctuations in customer demand for LCD and LED products generally; our success in promoting our brand of LCD and LED products in China and elsewhere; our ability to have effective internal control over financial reporting; our success in designing and distributing products under brands licensed from others; management of sales trend and client mix; possibility of securing loans and other financing without efficient fixed assets as collaterals; changes in government policy in China; the fluctuations and competition in sales and sale prices of LCD and LED products in China; China's overall economic conditions and local market economic conditions; our ability to expand through strategic acquisitions and establishment of new locations; compliance with government regulations; legislation or regulatory environments; geopolitical events, and other events and/or risks outlined in SGOCO's filings with the U.S. Securities and Exchange Commission, including its annual report on Form 20-F and other filings. All information provided in this press release and in the attachments is as of the date of the issuance, and SGOCO does not undertake any obligation to update any forward-looking statement, except as required under applicable law.

For investor and media inquiries, please contact:

SGOCO Group, Ltd.
Johnson Lau
Chief Financial Officer
Tel: +852 25010128
Email: ir@sgoco.com

 


SGOCO GROUP, LTD. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)


FOR THE YEARS ENDED DECEMBER 31, 2014, 2013 AND 2012


(In thousands of U.S. dollars except share and per share data)







2014




2013




2012















REVENUES



43,230




200,974




166,701















COST OF GOODS SOLD



41,213




185,045




154,221















GROSS PROFIT



2,017




15,929




12,480















OPERATING EXPENSES:













Selling expenses



297




1,073




670


General and administrative expenses



3,069




3,802




5,322


Total operating expenses



3,366




4,875




5,992















(LOSS) INCOME FROM OPERATIONS



(1,349)




11,054




6,488















OTHER INCOME (EXPENSES):













Interest income



338




12




8


Interest expense



(304)




(260)




(61)


Other income (expense), net



319




192




(130)


Change in fair value of warrant derivative liability



19




(3)




75


Total other income (expenses), net



372




(59)




(108)















(LOSS) INCOME BEFORE PROVISION FOR INCOME TAXES



(977)




10,995




6,380















PROVISION FOR INCOME TAXES



1,311




2,551




2,167


NET (LOSS) INCOME



(2,288)




8,444




4,213















OTHER COMPREHENSIVE INCOME (LOSS):













Foreign currency translation adjustment



(36)




805




(59)


Realization of foreign currency translation gain relating to disposal of subsidiaries



(805)




-




-















COMPREHENSIVE (LOSS) INCOME



(3,129)




9,249




4,154















(LOSS) INCOME PER SHARE:













Basic



(0.13)




0.49




0.25


Diluted



(0.13)




0.49




0.25















WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:













Basic



17,406,069




17,193,189




17,059,575


Diluted



17,406,069




17,193,189




17,059,575


 

 

 

SGOCO GROUP, LTD. AND SUBSIDIARIES


CONSOLIDATED BALANCE SHEETS


AS OF DECEMBER 31, 2014 AND 2013


(In thousands of U.S. dollars except share and per share data)






2014



2013


ASSETS









CURRENT ASSETS









 Cash



92




13,497


 Accounts receivable, net of provision for doubtful accounts of nil and $98, respectively



910




48,063


 Notes receivable



-




1,316


 Other receivables and prepayments



51




744


 Receivable from sale of a subsidiary



91,379




-


 Inventories



1




7,017


 Advances to suppliers



33




33,824


Prepaid income taxes



17




33,824


 Other current assets



56




51


Total current assets



92,539




104,512











PLANT AND EQUIPMENT, NET



14




223











Total assets



92,553




104,735











             LIABILITIES AND SHAREHOLDERS' EQUITY


















CURRENT LIABILITIES









Short-term loans



-




6,734


Accounts payable, trade



606




2,052


Loan from a shareholder



100




-


Other payables and accrued liabilities



209




695


Customer deposits



198




999


Taxes payable



6,241




6,126


Warrant derivative liability



2




21


Deferred tax liabilities



-




319


Total liabilities



7,356




16,946











Commitment and contingencies


















SHAREHOLDERS' EQUITY









Preferred stock, $0.001 par value, 1,000,000 shares authorized, nil issued and outstanding as of  December 31, 2014 and 2013



-




-


Common stock, $0.001 par value, 50,000,000 shares authorized, 17,414,861 and 17,660,356 shares issued and outstanding as of December 31, 2014 and 2013, respectively



18




18


Paid-in-capital



25,589




25,052


Statutory reserves



-




809


Retained earnings



59,601




61,080


Accumulated other comprehensive (loss) income



(11)




830


Total shareholders' equity



85,197




87,789











Total liabilities and shareholders' equity



92,553




104,735


 

 

SGOCO GROUP, LTD. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH FLOWS


FOR THE YEARS ENDED DECEMBER 31, 2014, 2013 AND 2012


(In thousands of U.S. dollars)






2014



2013



2012


CASH FLOWS FROM OPERATING ACTIVITIES:













Net (loss) income



(2,288)




8,444




4,213


Adjustments to reconcile net income to cash provided by (used in) operating activities:













Depreciation



19




76




69


Bad debt provision



-




98




-


Change in fair value of warrant derivative liability



(19)




3




(75)


Share-based compensation expenses



538




225




273


Deferred income taxes



-




314




-


Change in operating assets













Accounts receivable, trade



14,275




10,953




(39,496)


Notes receivable



1,316




(1,294)




-


Other receivables and prepayments



521




(561)




587


Inventories



2,009




(1,093)




34,557


Prepaid income tax



(17)




-




-


Advances to suppliers



(42,814)




(4,344)




(23,797)


Other current assets



53




31




(16)


Change in operating liabilities













Accounts payable, trade



13,495




(10,195)




7,390


Other payables and accrued liabilities



1,943




141




(164)


Customer deposits



(200)




(189)




997


Taxes payable



385




(1,225)




1,575


Net cash (used in) provided by operating activities



(10,784)




1,384




(13,887)















CASH FLOWS FROM INVESTING ACTIVITIES:













Proceeds from disposal of subsidiaries, net of cash disposed of $25



(25)




-




18,734


Purchase of equipment and construction-in-progress



-




(32)




(106)


Net cash (used in) provided by investing activities



(25)




(32)




18,628


 

 

 

SGOCO GROUP, LTD. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH FLOWS


FOR THE YEARS ENDED DECEMBER 31, 2014, 2013 AND 2012 - Continued


(In thousands of U.S. dollars)







2014




2013




2012















CASH FLOWS FROM FINANCING ACTIVITIES:













Proceeds from short-term loan



-




6,668




6,230


Payments on short-term loan



(2,599)




(6,230)




-


Proceeds from loan from a shareholder



600




-




-


Payments on loan from a shareholder



(500)




(209)




-


Net cash (used in) provided by financing activities



(2,499)




229




6,230















EFFECT OF EXCHANGE RATE ON CASH



(97)




368




42















INCREASE (DECREASE) IN CASH



(13,405)




1,949




11,013















CASH, beginning of year



13,497




11,548




535















CASH, end of year



92




13,497




11,548















SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION













Cash paid for interest



304




260




61


Cash paid for income taxes



963




3,205




575















SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES


























Receivable from the sale of a subsidiary



91,379




-




-


Settlement of consideration receivable – received in finished goods



-




-




38,397


 

SOURCE SGOCO Group, Ltd.



RELATED LINKS

http://www.sgoco.com